It's (credit) crunch time for the film industry

It's a perfect storm of financial distress," Stewart Till, chairman of the UK Film Council, told an audience of film producers, lawyers and distributors. Speaking at a champagne reception in the Shutters beach front hotel during the American Film Market in Santa Monica, Till was describing the current turbulence in the international film community. Bankruptcies are being predicted. Credit has vanished. The hedge fund money that flowed into the industry last year has gone. There is still the looming threat of an actors' strike in Hollywood.

It was no surprise, then, that the mood at the AFM was glum. Fittingly enough, one of the few projects generating much buzz among the buyers in Santa Monica was an end-of-the-world comedy called 2012-ish: The Day the Earth Bent Over. This had previously been known as Armageddagain. The film, which starts shooting in the spring in Louisiana, attracted distributors because it captured the sense of wry fatalism they were already feeling.

The market began in a small swell of optimism (quick to evaporate) thanks to Barack Obama's election. At the AFM's opening press conference, Troma boss Lloyd Kaufman, whose latest offering is Poultrygeist: Night of the Chicken Dead, boldly predicted that the Obama presidency will be good for independent film-makers as Obama stands up for the little guy. There is no danger that Troma, which has been around for more than three decades, will go under. Like certain insects after the apocalypse, Troma's tiny-budget exploitation movies (Toxic Avenger, Class Of Nuke'Em High etc) will appear long after higher forms of film-making are extinct. Not that this is much consolation to cinema lovers.

Producers and distributors tried to console themselves with the thought that filmgoing historically has seemed recession-proof. In times of hardship, we all like to go to the movies – it's affordable escapism, or so the conventional wisdom runs. This seemed to be underlined when the spectacular box-office figures for the new Bond movie rolled in over the weekend. But, the more pressing question is who is going to make movies when credit is as hard for producers to access as it is for anyone else.

Worryingly, the film world still has not experienced the full brunt of the economic crisis. There is a time lag. The movies being shown in Santa Monica over the past 10 days were financed a year or 18 months ago, when prospects seemed far less grim than they do today.

Certain trends are becoming very evident. Bulk buying is back in vogue. Art house films are becoming an endangered species in the US market. In one of the most depressing announcements of the market, IFC (the Independent Film Channel) struck a deal for 10 of the best festival films of the year. Titles like British director Duane Hopkins' Better Things, Thomas Vinterberg's When a Man Comes Home, Caroline Link's A Year Ago In Winter and Marco Bechis's Birdwatchers are all included. They will be released next year under the IFC's Festival Direct video-on-demand service. In other words, they're unlikely to be seen in cinemas. It's disheartening to see such titles being sold by the yard in like straight-to-video action movies.

Even the French seem to be turning against art house. Frank Ribière, a leading French producer and distributor, has just set up a New York-based company called Overlook (named after the hotel in The Shining) to produce and release lowish budget horror movies. The very mention of the French New Wave and "La Politique Des Auteurs" seems to infuriate him. "The French New Wave is dead," Ribière told me when I visited him in his AFM office in the Loews Hotel in Santa Monica. "They have polluted the movie business in France for 30 or 40 years. It's over! Nobody reads Cahiers Du Cinéma any more. Nobody cares any more about Truffaut or these guys. The world of cinema has changed. There is a new generation."

Maybe in reaction to the economic downturn, horror movies are being mass manufactured. One of the more egregious is Norwegian director Tommy Wirkola's Dead Snow, which Wirkola describes as Scandinavia's first "Nazi-zombie-horror-slasher-feelgood film". It's a bloodcurdling yarn about a group of eight medical students on holiday who are attacked in their mountain cabin by a battalion of German zombie soldiers, eager to rip them apart. Some 475 quarts of blood, the director boasted, were used in the scenes where the zombie soldiers arise from their graves. Films like Dead Snow have always abounded but you don't expect the Norwegians to make them. In the past, this was the province of US directors like Sam Raimi and George Romero. Now, film-makers all over the world are gatecrashing the exploitation genre. What's appealing about these kind of horror movies is that they can be made relatively cheaply and there are seemingly hordes of gawky young teenagers who want to watch them.

In these troubled times, film noir is making a comeback too. Much-travelled British director Michael Winterbottom is the latest to hit the Grifters road. In Hollywood last week, he announced that his next film will be The Killer Inside, a $13m adaptation from a novel by Jim Thompson starring Casey Affleck and Jessica Alba. The film follows West Texas sheriff Lou Ford's descent into violent psychosis – a condition all too familiar in today's financial markets. As murder victims begin to pile up suspicion falls on Lou. He will do anything to escape but he cannot escape what he is. Maybe other directors who want to keep on working can take a lesson from Winterbottom – his trick is to have a new movie lined up before the last one is finished.

Sex, meanwhile, remains a staple, in bad economic times as in good. The adult entertainment sector of the film industry may have suffered because of all the free content available on the web. However, plenty of porno films are still being made. Alan Siritzky, who owns the Emmanuelle franchise, is trying to bring Emmanuelle into the mainstream. He has announced plans for a $50m prequel that he will produce alongside Alain Sarde (better known for his work with David Lynch and Jean-Luc Godard than for his forays into blue movies). Siritzky is launching a worldwide search for an actress to play Emmanuelle, the role made famous in the early 1970s by Sylvia Kristel. He is planning an X-Factor-style reality TV show, Hunting For Emmanuelle, chronicling the audition process, to accompany the feature film. "The search will be done on internet, on cellphones and on the TV show ... anyone who wants to upload their submission, we will accept it on YouTube," Siritzky told me. The woman who finally wins the role will be guaranteed $1m.

Judging by projects that distributors are currently most interested by, there's a hankering for escapism. Even Ken Loach seems to be providing it. His new film Looking For Eric, again scripted by Paul Laverty, is about a football-obsessed postman at the end of his tether who, after smoking a fat joint, is helped through his darkest times by a proverb-spouting Eric Cantona ("he that sews thistles shall reap pickles", "he that is afraid to throw the dice will never throw a six"). Imagine It's a Wonderful Life in contemporary Manchester, with the former Man Utd fulfilling a similar role with Eric the Postman as Clarence the Angel does with James Stewart.

It remains to be seen whether the economic crisis facing the film industry will stimulate creativity or lead to a new conservatism. Early signs point toward the latter. Producers are turning to old action stars in the hope of dependable box-office hits. One of the indie movies that seemed to most excite the buyers was The Expendables, a drama about mercenaries overthrowing a South American dictator that Sylvester Stallone will both direct and star in (alongside Jason Statham). Steven Seagal also has a new project, The Keeper. Meanwhile, advanced word suggests that Bryan Singer's long-delayed Valkyrie, in which Tom Cruise plays Claus von Stauffenberg, is a riproaring thriller in the vein of Where Eagles Dare.

Amid the doom-mongering, there are voices suggesting that the credit crunch will have some positive effects. Chief among these is that it will solve the perennial problem of glut. Too many films are being made. Those that found distribution cannibalised one another's audiences and prices spiralled Now, the hope is of a leaner, less wasteful industry in which the real talent will be more quickly identified. The British production sector may be stuttering but at least the strong dollar makes the UK all the more attractive for the Hollywood studios to set up productions at Pinewood and Shepperton. Meanwhile, at least there is no sign that the public is falling out of love with movies yet. As Stewart Till puts it, "for those companies that get through the next two years, I think the future will be very bright. I'm not sure what colour it will be, but it will be bright."